Question 1

If demand is elastic, an increase in price will increase total revenue.

Accepted Answer

A) True 
 B)False

Question 2

A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.

Accepted Answer

A) True 
 B)False

Question 3

How might a market research analyst use measures of elasticity-price, cross, and income-in her work? Explain.

Accepted Answer

A market researcher is interested in det

Question 4

Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol. As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic. The quantity of bran consumed will

Accepted Answer

A) not change. 
B) change unless the demand curve is perfectly inelastic. 
C) rise by exactly 5,000 bushels. 
D) not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic. 
A) not change. 
B) change unless the demand curve is perfectly inelastic. 
C) rise by exactly 5,000 bushels. 
D) not rise by exactly 5,000 bushels unless the demand curve is perfectly inelastic.

Question 5

A demand curve to remain unit elastic along its entire length should

Accepted Answer

A) cross the X axis. 
B) touch the X axis but not the Y axis. 
C) never touch either the X or the Y axis. 
D) touch the Y axis but not the X axis. 
A) cross the X axis. 
B) touch the X axis but not the Y axis. 
C) never touch either the X or the Y axis. 
D) touch the Y axis but not the X axis.

Question 6

Using historical statistics is likely to produce accurate estimates of demand curves since such studies have large amounts of data to draw on.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that Carol owns a property with a mineral spring. It costs zero for Carol to sell water to customers since buyers come to her property and bring their own bottles and fill them themselves. If Carol wants to maximize her profits from the sale of her mineral water, she should choose the output level

Accepted Answer

A) where the demand curve for water hits the vertical axis. 
B) where demand is inelastic. 
C) where demand is unit elastic. 
D) demand is exhausted. 
A) where the demand curve for water hits the vertical axis. 
B) where demand is inelastic. 
C) where demand is unit elastic. 
D) demand is exhausted.

Question 8

The elasticity of any demand curve is the same as its slope.

Accepted Answer

A) True 
 B)False

Question 9

If a product constitutes a large portion of a consumer's income, demand will be more inelastic.

Accepted Answer

A) True 
 B)False

Question 10

The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.

Accepted Answer

A) True 
 B)False

Question 11

A correct formula (dropping all minus signs)for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is

Accepted Answer

A) [(P2 − P1)\(P2 + P1)]\[(Q2 − Q1)\(Q2 + Q1)]. 
B) [(P2 − P1)\P1]\[(Q2 − Q1)\Q1]. 
C) [(Q2 − Q1)\(Q2 + Q1)]\[(P2 − P1)\(P2 + P1)]. 
D) [(Q2 − Q1)\Q2)]\[(P2 − P1)\P2]. 
A) [(P2 − P1)\(P2 + P1)]\[(Q2 − Q1)\(Q2 + Q1)]. 
B) [(P2 − P1)\P1]\[(Q2 − Q1)\Q1]. 
C) [(Q2 − Q1)\(Q2 + Q1)]\[(P2 − P1)\(P2 + P1)]. 
D) [(Q2 − Q1)\Q2)]\[(P2 − P1)\P2].

Question 12

If two goods are complements, their cross elasticity of demand will normally be

Accepted Answer

A) zero. 
B) a negative number. 
C) a positive number. 
D) infinity. 
A) zero. 
B) a negative number. 
C) a positive number. 
D) infinity.

Question 13

Along a straight-line demand curve, the

Accepted Answer

A) slope is constant. 
B) ratio P \ Q constantly changes. 
C) elasticity grows much smaller toward the right-hand end. 
D) All of the responses are correct. 
A) slope is constant. 
B) ratio P \ Q constantly changes. 
C) elasticity grows much smaller toward the right-hand end. 
D) All of the responses are correct.

Question 14

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane. DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane. DuPont won the case. What type of evidence constituted DuPont's defense?

Accepted Answer

DuPont needed to show that other flexibl

Question 15

Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish is

Accepted Answer

A) negative. 
B) positive. 
C) zero. 
D) Any of the above is possible. 
A) negative. 
B) positive. 
C) zero. 
D) Any of the above is possible.

Question 16

If a firm increases its prices when the demand is inelastic, then the firm will see

Accepted Answer

A) an increase in revenues. 
B) a decrease in revenues. 
C) no change in revenues. 
D) no effect on the sales of its product. 
A) an increase in revenues. 
B) a decrease in revenues. 
C) no change in revenues. 
D) no effect on the sales of its product.

Question 17

If demand for a seller's product is elastic, a price decrease will increase total revenue.

Accepted Answer

A) True 
 B)False

Question 18

A perfectly elastic demand curve for a firm

Accepted Answer

A) is represented by a vertical line. 
B) means that with every unit price increase there will be a unit decrease in demand. 
C) is formulated by P × Q = a constant, for all prices and quantities. 
D) indicates that any increase in price will eliminate all purchases of its product. 
A) is represented by a vertical line. 
B) means that with every unit price increase there will be a unit decrease in demand. 
C) is formulated by P × Q = a constant, for all prices and quantities. 
D) indicates that any increase in price will eliminate all purchases of its product.

Question 19

If the cross elasticity of demand for potato chips and pretzels equals 1.5,

Accepted Answer

A) potato chips and pretzels must both be luxury goods. 
B) either potato chips or pretzels must be a luxury good, and both may be luxury goods. 
C) potato chips and pretzels must be substitutes. 
D) potato chips and pretzels must be complements. 
A) potato chips and pretzels must both be luxury goods. 
B) either potato chips or pretzels must be a luxury good, and both may be luxury goods. 
C) potato chips and pretzels must be substitutes. 
D) potato chips and pretzels must be complements.

Question 20

The relationship between a change in consumer income and a resulting change in demand for a good is

Accepted Answer

A) demand elasticity. 
B) income elasticity of demand. 
C) cross elasticity of income demand. 
D) supply elasticity. 
A) demand elasticity. 
B) income elasticity of demand. 
C) cross elasticity of income demand. 
D) supply elasticity.

Exam 6: Demand and Elasticity

If demand is elastic, an increase in price will increase total revenue.

A horizontal demand curve is perfectly elastic because a change in price will induce an infinite change in quantity demanded.

How might a market research analyst use measures of elasticity-price, cross, and income-in her work? Explain.

Scientific evidence suggests that consumption of foods rich in fiber lowers cholesterol. As a result, the demand for bran increases at every price by 5,000 bushels and the supply curve for bran is perfectly price elastic. The quantity of bran consumed will

A demand curve to remain unit elastic along its entire length should

Using historical statistics is likely to produce accurate estimates of demand curves since such studies have large amounts of data to draw on.

The elasticity of any demand curve is the same as its slope.

If a product constitutes a large portion of a consumer's income, demand will be more inelastic.

The law of demand states that a lower price increases the amount of a commodity that people are willing to buy.

A correct formula (dropping all minus signs)for the calculation of the elasticity of demand between point Q1, P1 and point Q2, P2 is

If two goods are complements, their cross elasticity of demand will normally be

Along a straight-line demand curve, the

In the DuPont cellophane case, rivals accused DuPont of monopolizing cellophane. DuPont claimed that the relevant market was flexible wrapping material, such as wax paper and aluminum foil, rather than just cellophane. DuPont won the case. What type of evidence constituted DuPont's defense?

Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish is

If a firm increases its prices when the demand is inelastic, then the firm will see

If demand for a seller's product is elastic, a price decrease will increase total revenue.

A perfectly elastic demand curve for a firm

If the cross elasticity of demand for potato chips and pretzels equals 1.5,

The relationship between a change in consumer income and a resulting change in demand for a good is

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

A correct formula (dropping all minus signs)for the calculation of the elasticity of demand between point Q₁, P₁ and point Q₂, P₂ is